MNC Media Investment's value generation has been hidden by wind-down of legacy business and

transfer of primary listing

MNC Media Investment (MNCMI) is the holding company for the new media investments of

the MNC Group, a leading Indonesian conglomerate.

MNCMI owns 50.1% of Letang Games, a highly successful mobile gaming company preparing

a Shenzhen IPO with a possible valuation over $500mm

MNCMI owns 100% of Fumubang, a social commerce business for Chinese parents which is

currently seeking external financing at a valuation of US93mm to $142mm

MNCMI has $89mm of unrestricted cash and securities that will support the growth of current

and future businesses

MNCMI's Chinese games

MNC Media Investment (LTONY) trades at a large discount to its tangible Net Asset Value per share of

$2.68 and current fair value in a range of $5.61 to $12.26. Potential catalysts for share price price

appreciation towards fair value are:

Continued rapid growth of its key businesses (Letang and Fumubang)

Fund-raisings that bring visibility to the current fair value of these key subsidiaries

Any corporate reorganization that consolidates the shares trading in the US and Australia in

order to raise visibility and liquidity

This article will cover:

1) Background Share Structure

The MNC Group

MNCMI History and its position within the MNC Group

2) Business Units

and Valuation Letang Games

Fumubang

Yododo

Okezone

Corporate Cash & Investments

3) Risks

4) Further Reading

THE SHARE STRUCTURE

MNCMI has 404mm ordinary shares outstanding, but there is no market for ordinary shares. 10

ordinary shares equal one Chess Depository Interest (CDI) listed on the Australian Stock Exchange

under the symbol MIH. 10 ordinary shares also equal one American Depository Share which trades

OTC in the US under the symbol LTONY. MIH and LTONY have equivalent economic value and are

convertible with payment of a fee to the depository. For simplicity, references in this article to one

"share" will mean one tradable depository receipt. All references in the article to "$" mean US$ unless

otherwise stated.

THE MNC GROUP

MNCMI is a unit of the MNC Group, a leading Indonesian media conglomerate with seven listed

businesses providing content development and distribution through broadcast, satellite, cable, internet,

radio, and print. The listed units are:

MNC Investama (PBHKF)(BHIT:JK $0.6Bn market cap) is the holding company controlled

by group Chairman Harry Tanoesoedibjo

Global Mediacom (PTGOF)(BMTR:JK $1.0Bn market cap) is the holding company for all of

the group's media businesses

Media Nusantara Citra (MNCN:JK $1.7Bn market cap) operates 4 of Indonesia's 11

broadcast TV networks and 19 pay-TV channels. MNCN also owns radio, print media, talent

management and TV production companies.

MNC Sky Vision (MSKY:JK $0.7NBn market cap) offers a 60 channel satellite pay-TV service

MNC Land (KPIG:JK $0.7Bn market cap) engages in the development, construction and

acquisition and management of commercial properties and integrated resorts.

MNC Kapital (BCAP:JK $0.5Bn market cap) provides a full range of financial services

including banking, securities, insurance, and asset management

MNC Media Investment (MIH:AX $0.06Bn market cap) is the holding company for the

group's new media content businesses

MNCMI HISTORY & ITS POSITION WITHIN THE MNC GROUP

1999

Company founded in China as a provider of cell phone

Value Added Services (ringtones, mini-games, messaging

services and advertising)

2004 NASDAQ IPO at $14/share under the name “Linktone”

(LINK)

2008 Indonesia's MNC Group pays $3.80/share to acquire 57%

of the company (LINK)

2010 MNCMI acquires 50.1% of Letang, a mobile game

developer founded in 2009

2012 MNCMI acquires okezone, a leading Indonesian news

portal, from a related party

2013 MNCMI launches fumubang, a social commerce site for

Chinese parents

2014 MNCMI changes its primary listing to Australia (LINK)

After becoming part of the MNC Group in 2008, MNCMI was set up as a holding company for the

group's internet and new media content businesses. Combining them under one listed entity was

expected to enhance their reputation and visibility. The primary exchange listing shifted to Australia in

order to avoid regulation under the US Investment Company Act, reduce annual expenses, and ease

communication within the group's Asian time zone. Unfortunately the process for holders to convert

their ADS into the CDI tradable in Australia proved much more of a deterrent than expected. At

12/31/14 only 4.9% of shares were held as CDI and 49.9% of the company's shares were still held as

ADS. The small number of CDI means that the shares rarely trade in Australia. OTC trading in the US

is more liquid, but the company provides no reporting or investor relations targeted at these holders

leading to a share price that far from reflects the company's value and potential.

The successful evolution of MNCMI's business in recent years has been disguised by the wind-down of

its legacy feature phone value added services:

MNCMI's parent company (Global Mediacom) has been providing regular updates about progress at

MNCMI's business units (source: company presentation)

Looking at the business units in more detail:

MNCMI BUSINESS UNIT – LETANG GAMES (50%)

Estimated Value of US$55-275mm or $1.36-$6.80 per share

http://www.joymeng.com

Letang's success over the past two years has been driven by two hit games:

Boonie Bears – based on a popular Chinese animated series

Armor Heroes – based on a Chinese action series

The MNC Group's leading position in one of Asia's largest media markets has provided connections

and credibility for Letang to negotiate licensing agreements for development of games based on other

franchises popular throughout Asia:

Ultraman – Japanese action series

Crayon Shin-Chan – Japanese animated series

Back-Kom – Korean animated series

Big Head Boy – Chinese animated series

A Chinese Odyssey – a multiplayer game based on a movie with legendary Chinese themes

Measurement of game popularity in China is complicated by the existence of over 200 independent app

stores. Each game is also frequently updated with new content to keep players engaged and encourage

spending on in-app features so cumulative downloads will exceed the number of actual players. For

example, MNCMI calculates that Boonie Bears has been downloaded over 248mm times through major

app stores while Letang itself boasts a cumulative total of over 400mm downloads. Without focusing

too closely on the total, it's obvious from browsing major app stores that Letang's games are very

popular:

Game App Store (with game link)

Boonie Bears Launched Winter 2014

Over 248 million downloads

Armor Heroes Launched Summer 2014

over 81 million downloads

As disclosed by Global Mediacom, Letang made preparations for an IPO on the Shenzhen exchange

with an estimated valuation of $1 billion, implying a value of $500mm for MNCMI's stake. Letang

does not need to raise capital to develop its business, but the potential valuation and increased visibility

would have been attractive. MNC Group Chairman Harry Tanoesoedibjo described it in August

(LINK)

“At the Global Mediacom level the Company continues to perform well in its China online

businesses. Bonnie Bear and Armor Hero has garnered more than 320 million downloads and

achieved revenue of 32 million for the first half. In addition, FuMuBang the family activities app

also based in China has also performed very well with 4.7 million booking revenue in the first half

versus only 1.3 million last year. Both of these businesses continue to represent value for the

Company and for investors and the Company will continue to explore options to help monetize the

value of these two businesses.”

All IPOs are currently suspended in China due to market volatility, but will eventually resume because

a free and professional capital market is a long-term government policy objective. Post-crash valuations

of Chinese game developers suggest that Letang may still be worth 10 times trailing 12 month revenues

or more. Letang has far above average growth, but lower than average gross margin due to its strategy

of paying intellectual property licensing fees. Valuations of game developers listed outside China

suggest a lower fair value of perhaps 2 times trailing 12 month revenues (data as of 10/8/15):

Higher valuations within China are attributable to greater familiarity with games produced by these

companies and optimism about the industry's medium term potential. Game consultancy Newzoo

(LINK) estimated Chinese gaming industry revenues at $18Bn in 2014 and forecast an increase to

$33Bn in 2018. Newzoo estimated Southeast Asian countries generated a combined total of $1.1Bn in

2014 game revenues. Within this, Indonesian game revenues were about $0.2Bn and are projected to

continue growing at 37% per year. The combination of Letang's game development expertise in the

demanding Chinese market, licenses for franchises (e.g. Ultraman etc...) with pan-Asian appeal and

MNC's leading Indonesian media presence provide an attractive long-term growth opportunity outside

China.

Fair Value Estimate:

Low: $55mm based on 2X trailing 12 month revenue (offshore valuation)

High: $275mm based on 10X trailing 12 month revenue (onshore valuation)

MNCMI BUSINESS UNIT - FUMUBANG (100%)

Estimated Value of US$78-127mm or $1.93-$3.14 per share http://www.fumubang.com

Fumubang is a "social commerce" website currently serving over one million members in Beijing and

Shanghai. The site provides editorial content, community forums, and ecommerce offerings related to

enrichment and leisure. Rather than a simple directory or listing service, fumubang offerings are

"curated" based on editor's awareness of community preferences and a subjective evaluation of the

service. Offerings are supported by rich visual content shared by users.

Admission to the Beijing Wildlife park provides an example (LINK). Fumubang has sold 496 tickets

and the site has currently arranged over a 20% discount for its members. Official photos are

supplemented by site member photos and comments that provide users with a good guide to whether

this is likely to be an appealing excursion

(Official photo)

(photo uploaded by user)

Key Trends favoring the business are:

Growing middle class and affluent urban population (McKinseyestimates a combined total of

188mm households compromising 460mm people by 2020)

Delayed marriage means greater family resources available for discretionary spending

Small family size means more intense focus on the experience of childhood

Societal shift towards greater consumer consumption

Fumubang is currently optimizing its operating model before likely expansion to Shenzhen and/or

Guangzhou in 2016. McKinsey estimates that 85% of China's 2020 middle class currently live in the

country's top 100 cities, but that fastest growth will come in the next 300 cities. The pace of

Fumubang's growth will be limited by the importance of customizing the site for each new city.

The valuation of Fumubang suggested by Global Mediacom equates to about 10X current year

revenues and seems reasonable relative to the company's high growth and huge long-term potential.

The company does not need external financing, but would do so at a fair valuation in order to raise its

visibility and possibly attract a strategic partner(s) who could contribute to the company's development.

Fair Value Estimate:

Low: $78mm based on 85% of low-end financing valuation disclosed by Global Mediacom

High $127mm based on 85% of high-end financing valuation disclosed by Global Mediacom

MNCMI BUSINESS UNIT - YODODO (20%)

Estimated Value of US$5mm or $0.12 per share

http://www.yododo.cn/

MNCMI's recent purchase of a minority stake in the Yododo travel site deserves mention because it

follows an appealing "social commerce" strategy similar to Fumubang. Abundant photos and

travelogues uploaded by the site's six million users complement editorial guides and listings of

guesthouse accommodations (with user reviews). The business plan envisions three avenues for

expansion:

More listings for independent guesthouses

Yododo branding available for guesthouses that agree to meet company standards

a few Yododo operated guesthouses that serve as brand flagships and models for franchises

The company will benefit from many of the same trends as fumubang such as the rising number of

middle class households and rising spending on discretionary consumption. The Chinese government

has comprehensive plans to boost recreation and tourism industries (see State Council Opinions of

08/11/15). Consultancy iresearchchina projects that online travel spending will reach 805Bn RMB

(about $127Bn) in 2018, nearly double the projected 2015 level (report link).

Fair value estimate is based on the recently disclosed cost.

MNCMI BUSINESS UNIT - OKEZONE(100%) http://www.okezone.com

Okezone is a leading Indonesian online news portal serving almost 20 million daily page views.

MNCMI acquired it from a related party for just $500k in 2012. Much of the content is provided at

minimal charge by other MNC media companies. Current revenues are very low, but the company is

focused on maximizing its market presence in order to create multiple avenues for future monetization

as Indonesia's internet population expands and matures.

MNCMI NET CASH & INVESTMENTS

Estimated Value of US$89mm or $2.20 per share

At the parent company level MNCMI had $12mm of unrestricted cash and 714mm shares of related

party MNC Land worth $77mm at 6/30/15. The shares were considered an attractive alternative to

cash until MNCMI needed those funds for current or potential new media investments.

Fair value is based on 6/30 financial statement. MNC Land's share price has risen 1% since 6/30 and

the Indonesian rupiah has fallen 4%.

MNCMI COMBINED VALUE

Business Unit Low Value per share High Value per share

Letang Games $1.36 $6.80

Fumubang $1.93 $3.14

Yododo $0.12 $0.12

Net Cash &

Investments $2.20 $2.20

Total $5.61 $12.26

RISKS

MNCMI's current stock valuation of just 53% of Tangible net assets and just 28% of my low estimate

of fair value implies that investors perceive a very high level of risk of investing in the company.

Investors evaluating MNCMI should carefully consider:

Parent Company Control. Global Mediacom owns 83% of MNCMI shares so the influence of

minority investors will be extremely limited. Up to this point it appears that the actions of the MNC

Group have been favorable to MNCMI with the introduction of valuable new business units (Letang

and Fumubang) and the transfer of okezone for minimal consideration. If the MNC Group wanted to

exploit MNCMI then the best opportunity passed in 2014. Since then Global Mediacom has been trying

to raise the visibility of the MNCMI businesses through its investor communications and presentations.

IF MNCMI shareholders were disadvantaged then it would bring negative attention to all of the related

listed companies.

Early Stage Business. Letang and Fumubang have impressive past and potential future growth, but

they are both early stage private businesses. Failure to successfully execute their business plans or

rising competition could sharply reduce the fair values estimated in this article.

Listing. Transfer of the primary listing to Australia occurred with a majority of the public shares still

held in the form of ADS. A corporate initiative to catalyze the conversion of these ADS into the CDI

tradable in Australia would probably lead to increased liquidity, visibility, and a higher valuation.

Absence of any action might leave the ADS to continue trading inefficiently in their current "orphan"

status.

FURTHER READING

Interested investors should study:

MNCMI's ASX Regulatory filings (LINK)

MNCMI's SEC filings until 2014 (LINK)

Business unit websites:

◦ Letang (LINK)

◦ Fumubang (LINK)

◦ Yododo (LINK)

◦ MNC Land, a significant short-term investment (LINK)

Global Mediacom Investor Relations (LINK)

Technode, a bilingual website covering Chinese start-ups (LINK)

Newzoo, consultancy with free data and reports on global gaming (LINK)